Recession can bring with it opportunities as well as threats.
And even if starting up a new business when the economy is shrinking does prove to be a baptism of fire, it could strengthen you in the long run. If you survive, think how well you’ll perform when the good times return.
Here are some of the ways you can withstand a recession when you start a new business.
Sell food
Some goods are a necessity, meaning people will buy them in about the same quantities irrespective of whether their income rises or falls. So businesses that sell essential goods or services generally perform as well in lean times as they do in boom time.
Businesses that sell essential goods or services generally perform as well in lean times as they do in boom time
The most obvious necessity is food, being, as it is, pretty much fundamental to our survival.
However, there’s a difference between what you need to eat to survive and the amount of food we in the Western world actually eat. People can and do cut back in less bountiful times.
A food retailer might consequently think differently about how to market its goods in a recession. For example, instead of Two-for-One offers consumers might prefer getting a single item for half the price.
People don’t just cut back in terms of volume. While sales of premium ranges could drop, value ranges might conversely fare better.
However, ‘luxury’ foods aren’t always sacrificed on the alter of belt-tightening. Haagen Dazs ice-cream, for example, sold well during the early 1990s recession because although it was luxurious, it was still affordable to the average person.
Sell affordable ‘luxury’ goods
People do not wish to forgo all pleasure during economic downturns. They will cut back on inessential expenditure, but cherish what remains even more as a result.
This means that businesses which offer slimmed down versions of luxury goods can prosper, as Jim Surguy, senior partner at Harvest Consulting explains: “When times are hard people will search for value, so the response should be to make smaller versions of the same things they always buy – drinks in half-sized bottles, or seeds not plants, or holidays lasting five days instead of seven days.”
Instead of cutting back, people can substitute their luxury goods for cheaper versions. For example, someone might buy some Cadbury’s chocolate from the newsagent instead of going to a premium chocolatier such as Hotel Chocolat. Or they might rent a DVD instead of going to the cinema. Or they might substitute a holiday in the States with a holiday in France.
To sate your customers’ wish for luxury goods in lean times, then, you need to sell them more cheaply. This means you should make them more cost-effectively, by sourcing cheaper materials/ingredients or having a more efficient production process. Or you could just accept tighter profit margins.
